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Turnover-based concession fee

(17 Posts)
ChinaCupsandSaucers Wed 14-Aug-13 13:53:30

I've been asked to provide a pop up tearoom-style service at our local community centre open day which is opposite my cafe.

They've suggested a fee based on a % of turnover on the day; but I have no idea what a reasonable % would be, and can't find anything online - any ideas?

I will benefit from their advertising and it will give me increased exposure to the users of the Centre - but I'm looking for some guidance on where to start from in terms of negotiating.

NeoMaxiZoomDweebie Wed 14-Aug-13 15:40:20

I would try them on 15%. I chose that because it's the amount which most agents take from their actors! I think it's fair because you need to profit still....all they're doing is hosting.

ChinaCupsandSaucers Wed 14-Aug-13 16:51:36

Well, their first offer was 50:50 so I've got some negotiating to do!

NeoMaxiZoomDweebie Wed 14-Aug-13 17:46:24

grin Well I am a hard-nosed businesswoman! It's in their interest to have you there...what are they losing? The use of some otherwise disused space I suspect.

50-50 won't see a decent return for you at all will it?

Go back in and say I can offer you a 25% cut... I just won't be able to make ends meet on 50-50....any less will be impossible.

Have you worked out what you will stand to lose/make when compared with your usual profits?

NeoMaxiZoomDweebie Wed 14-Aug-13 17:51:48

You've listed where you will benefit but they will also benefit in having you there...providing refreshments to staff and clients and improving their image generally....more people will visit if they can get a cup of coffee in house.

ChinaCupsandSaucers Wed 14-Aug-13 19:02:05

Thanks neo - because it's so close to my premises, I don't think I'll lose much regular custom - an enthusiastically worded poster on the door should encourage most to trot across the road for their tea and cake, so I won't lose out even if their event is a flop! If it was anywhere else I wouldn't do it because I'd lose goodwill by closing for the day.

I'll do some number crunching, but 25% seems reasonable, thanks smile

NeoMaxiZoomDweebie Wed 14-Aug-13 19:27:25

I really wouldn't do it if you don't manage to keep your premises open as usual....why would you close? Even if they have a busy environment it's bad practice to shut up shop to go over the road. I don't think I would go into a community centre for coffee or tea above a regular cafe tbh.

Can you employ someone else?

countrymummy13 Sat 17-Aug-13 00:11:29

I wouldn't do it. And I certainly wouldn't pay for it.

The fact that they have asked for 50% of turnover proves they don't know what they're talking about.

What % of your t/o is your gross profit? 50%? 40%? If you're going to pay them a % you have to decide how much of your profit you're prepared to give them. And take in to account the money you'd be losing by closing the cafe.

How many people are going to be at the event? How many of them will buy something from you? How much will they spend?

Your thought process should be something like this -

100 people at event
50% buy
Avg spend £3
Turnover £150
50% Gross Profit £75
Less GP that would have been earnt at the cafe £20
Net Profit of being at the event = £55
50% of that to the centre is £27.50
£27.50 of turnover is 18.35%

Therefore 18% of t/o should be your maximum.

But you need to consider the cost of loss of reputation by closing the cafe. If only one customer turns up when you're closed they won't come again. And they'll tell their friends you're "not always open".

I personally wouldn't do it. If reaching a new audience is your goal then IMO you should be putting your efforts in to getting those people in to the cafe.

NeoMaxiZoomDweebie Sat 17-Aug-13 00:13:55

Ooh Country knows her stuff and I wasn't far off the mark with my 15% was I country? And that was a feely around in the dark instinctive one too!

But I agree....seems odd to shut her cafe on the street to go and sell her wares over the way in a community centre and then give them loads of money too!

countrymummy13 Sat 17-Aug-13 00:39:46

Yes, we'll done neo - top of the class for you! wink

OP if you're a new business then I can see the advantage of you being there. Or, if it is for a couple of hours during the week then maybe I'd say it was feasible.

However, if you're an established business or you're talking about a whole day at the weekend then I honestly think you'd be crazy to close your cafe to do this.

If you try to tempt those 100 visitors to come to you, maybe you'd only get 20%. But, those 20% will earn you £30 GP. That's £2.50 more than you'd earn by selling to 50% of the visitors at the community centre. And you'll have a greater chance of up-selling them, you might attract more than 20% and if they see your cafe they will be more likely to visit you again.

I would invest in some helium balloons, some bunting, and a big chalk board with a great 'free bun with every two coffees' offer.

obviously numbers I've quoted are made up for illustration purposes!

ChinaCupsandSaucers Sat 17-Aug-13 08:21:40

Thanks all!

The situation is complicated by the fact that my cafe doesn't have 'passing trade' as such - it's a community cafe, so those people who regularly come in on a Saturday will also go to the Community Centre open day. They are likely to pop into the Centre before their daily regular visit to the cafe, see me and buy from me there when they see me rather than go across to the cafe, so any staff I pay to be in the cafe will be standing around doing nothing!

I've done a couple of pop-ups over at the Centre before when there have been other events on and closed up the cafe without any long term impact - but it's always been a fixed fee previously, it's the Centre Committee who have asked for 50% this time.

ChinaCupsandSaucers Sat 17-Aug-13 08:22:29

Just to add - Saturday is my quietest day, turnover wise.

countrymummy13 Sat 17-Aug-13 08:58:08

I still don't see the benefit for you.

You said your customers are the same people. And that if you're not at the community centre they would come to you at the cafe.

So why pay the community centre for business you would acquire anyway?

Do you anticipate attracting any new customers, or will it be the same old crowd?

It sounds to be like the committee either don't know much about business, or are being cheeky.

countrymummy13 Sat 17-Aug-13 09:00:23

If you're going to do it, and you're going to pay them then the only sensible thing to do is do your sums to work out how much to pay them.

But don't forget that out of your gross profit, you've also got your fixed costs to come out if that.

Whatever you work out is the right price for you, stick to it.

ChinaCupsandSaucers Sat 17-Aug-13 09:48:20

I think I'll offer to pay a fixed price similar to what I've paid before, or a very low (10%) of the days revenue and see which they go for!

I will reach some potential 'new' customers - a lot of groups who use the centre regularly (bowling, line dancing etc) dont all know im here and they are being invited along to do demos and attract new members to their own clubs - I'd quite like to see if I can do a deal with the organisers of these; say, free coffee with every cake for the bowling club on Tuesdays, or a meal deal for the line dancers on a Weds for instance. Because I'm open when they usually hold their club, I can't wander over to meet them on their usual day - being able to chat to them while serving them tea and cake at the open day seems like a good option!

The actual 'public visitors' to the day will be my regular cafe customers and are likely to follow me over there.

I'm also keen to keep the Community Centre committee 'on side' because I've got an idea for some pop-up luncheon clubs during the winter which I can't do in my own cafe (limited cooking facilities). The community centre would be the perfect location to offer these to my regulars - but only if I can negotiate the right price!

TheDoctrineOfJetlag Sun 18-Aug-13 07:04:52

So if you've done it before, do you know what your revenue was on those days and what % the fixed fee represented?

Agree that 10-20% sounds the right range.

ChinaCupsandSaucers Sun 18-Aug-13 09:29:11

jetlag I wish it were that simple!

Previously, I've provided a pop-up tea room there when its been hired by a third party to host an antiques Fayre - the third party hired the whole building, and recouped that by charging pitch fees to the stall holders and a fixed fee from me and I kept all my revenue.
I knew in advance how many stalls there was going to be and what the likely footfall was.

This is more of a gamble because its not been done before - the Community Centre committee are trying to promote use of the building by the community (parties, weddings etc) and have decided to host an open day.
They've invited groups who currently use the hall regularly to come along and 'demonstrate' what they do - an opportunity for those groups to increase membership from the immediate community, but at the moment, none of those groups have made a firm commitment.

It's a new thing for everyone, including me, and I want to try and minimise any loss I make if its a total flop but still deal with it in a businesslike way.
I thought their proposal was high but had no idea what the 'standard' was - 15% seems fair all round to me!

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